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1. Introduction

This quarterly financial report (QFR) has been prepared as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. This quarterly report should be read in conjunction with the Main Estimates, Supplementary Estimates A, Canada’s Economic Action Plan 2014 (Budget 2014) and Canada’s Economic Action Plan 2015 (Budget 2015).

1.1 Basis of Presentation

This QFR has been prepared using an expenditure basis of accounting. The accompanying Statement of Authorities (Table 1) includes the CBSA’s spending authorities granted by Parliament and those used by the Agency, consistent with the 2014-2015 and 2015-2016 Main Estimates and Supplementary Estimates A.

Parliamentary spending authority is required before monies can be spent by the Government. Approvals are given in the form of approved limits through appropriation acts or through other legislation providing statutory spending authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The CBSA uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

The QFR has not been subjected to an external audit or review.

1.2 Financial Structure

The CBSA has a financial structure composed of voted budgetary authorities that include Vote 1 Operating Expenditures and Vote 5 Capital Expenditures, and statutory authorities that consist mainly of contributions to the employee benefit plans.

In addition, the Agency has the authority from Parliament to expend certain revenues that it receives in a fiscal year through the conduct of its operations to offset expenditures that it incurs in that fiscal year. As a result of this respendable authority, some of the Agency’s programs are partially funded through User Fees (e.g., Nexus).

The CBSA currently operates on the basis of a two-year appropriation, whereby any unused spending authority at the end of a fiscal year is available to be used the following year. Any portion of the spending authority not used at the end of the second year is lapsed. However, announced in Budget 2015, the CBSA will transition to a standard one-year appropriation in 2016-2017 in order to create a unified appropriations framework for federal departments and agencies.

2. Highlights of Fiscal Quarter and Fiscal Year-to-Date (YTD) Results

This section highlights the significant items that contributed to the net increase or decrease in resources available for the year and actual expenditures as of the quarter ended June 30, 2015.

Graph 1 - Comparison of Net Budgetary Authorities and Expenditures as of June 30, 2014 and June 30, 2015 (in thousands $)

2014–2015

2015–2016

Net Budgetary Authorities

1,736,391

1,791,341

Expenditures for the quarter ending June 30

449,211

374,305

2.1 Significant Changes to Authorities

For the period ending June 30, 2015, the authorities provided to the CBSA are comprised of the Main Estimates and Supplementary Estimates A. For the same period the last fiscal year, only Main Estimates were included, the Agency did not require any funding through Supplementary Estimates A.

The Statement of Authorities (Table 1) presents a net increase of $54.9 million or 3.2% in the Agency’s total authorities of $1,791.3 million at June 30, 2015 compared to $1,736.4 million total authorities at the same quarter last year.

This net increase in the authorities available for use is the result of an increase in Vote 1 – Operating Expenditures ($15.2 million), an increase in Vote 5 – Capital ($33.7 million) and an increase in Budgetary Statutory Authorities ($6.0 million), as per detailed below.

Vote 1 – Operating

The Agency’s Vote 1 Operating increased by $15.2 million or 1.1%, which is mainly attributed to the net effect of the following significant items:

Increases totaling $59.4 million mainly due to:

$30.9 million for new collective bargaining agreements; and

$22.6 million for the Arming Initiative due to the reprofile of funding from 2014-2015 to 2015-2016.

Decreases totaling $44.2 million mainly due to:

$23.1 million decrease in the project funding requirements in 2015-2016 for the eManifest project; and

$20.3 million due to the sunsetting of funding for Front-line Operations.

Vote 5 - Capital

The Agency’s Vote 5 Capital increased by $33.7 million or 20.8%, which is mainly attributed to the net effect of the following significant items:

Increases totaling $74.8 million mainly due to:

$29.5 million for the Border Infrastructure initiative as part of the Beyond the Border Action Plan;

$16.3 million to both leverage the services of a systems integrator to finalize the ARL capability and to ensure systems and business readiness to outsource the information technology components of the CBSA Assessment Revenue Management (CARM);

$15.4 million through Supplementary Estimates A, from Transport Canada for renewal of border facilities and related infrastructure; and

$11.4 million increase of project funding requirements for the Entry/Exit initiative as part of the Beyond the Border Action Plan.

Decreases totaling $41.1 million due to reduction in project funding of specific initiative:

$18.9 million for the replacement of the Field Operations Support System with the Global Case Management System;

$14.1 million for the Integrated Cargo Security Initiative as part of the Beyond the Border Action Plan; and

$8.1 million for the eManifest project.

Budgetary Statutory Authorities

The Agency’s Statutory Authority related to the employee benefit plan increased by $6.0 million, or 3.4% from the previous year.

2.2 Explanations of Significant Variances in Expenditures from Previous Year

As indicated in the Statement of Authorities (Table 1), the Agency’s expenditures for the quarter ending June 30, 2015 was $374.3 million, as compared to $449.2 million for the last year. The decrease of $74.9 million in expenditures is mostly due to the following items.

The Vote 1 Operating Expenditures year-to-date used at quarter end decreased by $79.1 million or 20.0%. Total expenditure of $316.2 million compared to $395.3 million last year. $38.0 million of the decrease can be attributed to the Government of Canada’s one-time transitional payment as it moved to a pay-in-arrears. The remainder is mainly due to severance payouts reimbursed in 2014-2015 as a result of the signed collective agreement for Border Services Officers (FB classification) for a total of $54.5 million and offset by other increases in salary.

The Vote 5 Capital Expenditures year-to-date used at quarter end increased by $2.7 million or 27.8%. Total expenditure of $12.4 million as compared to $9.7 million last year. The increase is primarily due to the replacement, expansion and modernization of the Port of Entries facilities.

The Departmental Budgetary Expenditures by Standard Object (Table 2) indicates a decrease in gross budgetary expenditures incurred during the 1st quarter of $73.8 million or 16.3%, $377.6 million in 2015-2016 compared to $451.4 million in 2014-2015. Expenditures during the quarter represent 20.9% of planned expenditures as compared to 25.9% in 2014-2015. The most notable variances by standard object from the 1st quarter last year to this year are as follows:

A net decrease of $38.5 million in personnel expenditures mainly due to severance payouts as a result of the signed collective agreement for Border Services Officers (FB classification) in 2014-2015 for $54.5 million and offset by other personnel related increases; and

A decrease of $38.0 million in other subsidies and payments mainly due to the one-time transition payment for implementing salary payment in arrears by the Government of Canada in 2014-2015.

The planned revenue from the sales of services reflects the Agency’s revenue respending authority and it was increased by $2.0 million or 12.2% largely due to anticipated volume increases related to programs such as Nexus ($18.4 million in 2015-2016 as compared to $16.4 million in 2014-2015). The year-to-date revenue from the sales of services is up by $1.0 million or 45.5% ($3.2 million as compared to $2.2 million in 2014-2015) due to the timing in the collection of payments and volume increases in the Nexus program.

3. Risks and Uncertainties

The complexity of the operating environment of the CBSA can be seen in the broad scope of external drivers. Developments in geopolitical relations, in the global economy, in environmental matters, and in human and animal health cascade down into Canada’s trade, immigration, tourism and refugee patterns, affecting volumes and introducing security and facilitation challenges. Continued growth in both global trade and the virtual economy has benefitted legitimate business and criminal enterprises alike, and presents more complexity in managing Canada’s supply chain and physical borders.

In considering these factors, the CBSA has embarked on various initiatives, including those identified in the Beyond the Border Action Plan, that will allow the organization to be even more efficient and effective in the way it does business through increased efforts to address threats early and facilitate trade and travel.

To improve its ability to successfully deliver on its initiatives, the Agency regularly examines its enterprise risk landscape, the results of which are published in the CBSA Enterprise Risk Profile (ERP). The ERP identifies and ranks the top risks to the Agency’s strategic outcome.

The Agency's top three external business risks, as evaluated by senior management and found in the CBSA Enterprise Risk Profile are the following:

Food, Plant and Animal (FPA) - The speed and ease with which travel and trade move around the globe has increased Canada's vulnerability to FPA-related threats. The economic and ecological impacts resulting from the introduction of dangerous FPA commodities to Canada could be considerable;

Contraband - Over the past two decades, organized crime such as drug and currency trafficking, and the illegal movement of firearms, tobacco and vehicles has become increasingly sophisticated and presents enforcement complexity as it reaches beyond national jurisdictions. Ongoing collaboration with law enforcement partners, the use of automated targeting systems, and the work accomplished by a variety of enforcement teams are examples of ways the Agency controls its exposure to the Contraband risk; and

Terrorist Activities - Terrorism is recognized as a national security threat as Canada has been identified as a target by certain extremist groups. There is a constant need for vigilance and the Agency is continuing to mitigate the risk as the occurrence of a terrorist act either in, or associated with Canada, could have significant impacts.

Finally, Budget 2015 reiterated the Government’s commitment to border-related priorities by earmarking funding for several key CBSA initiatives. While some of these initiatives are underway in fiscal year 2015-16, the Agency is managing their delivery in the absence of Parliamentary Supply due to the election period. The resumption of Parliamentary business is anticipated in late 2015 or early 2016.

4. Significant Changes in Relation to Operations, Personnel and Programs

4.1 Key Senior Personnel

There have been changes in senior level personnel, most notably the appointment of a new President, Linda Lizotte-MacPherson, replacing Luc Portelance who retired from the public service. Also, Christine Walker was appointed to the Vice-President for the Comptrollership Branch and Chief Financial Officer.

4.2 Operations

The Agency continues to pursue its Border Modernization agenda, including the implementation of its Beyond the Border Action Plan projects and its engagement with employees and stakeholders on the application of the guiding principles of Blueprint 2020. In addition to these, in Budget 2015, the Government continued to demonstrate its commitment to border-related priorities, including the replacement of up to 77 ports of entry across Canada.

Budget 2015 also proposes to “expand the use of biometric screening to verify the identity of all visa-required travellers seeking entry to Canada.” This investment will see the introduction of new kiosk technology at Canada’s major airports that will enhance border management and immigration security. Additional resources were also proposed to augment CBSA capacity to work with its security and law-enforcement partners to identify and interdict high-risk travellers.

4.3 New Programs

There have been no significant changes in relation to programs. The Agency continues to play an instrumental role in implementing the Beyond the Border Action Plan initiatives as announced by the Prime Minister and the U.S. President in December 2011. This Action Plan provides a practical road map for speeding up legitimate trade and travel.

The CBSA will continue to review its systems and processes to ensure a stable transition towards a single-year appropriation model. As per Budget 2015, the CBSA will transition to a standard one-year appropriation in 2016-2017 in order to create a unified appropriations framework for federal departments and agencies.

5. Approval by Senior Officials

Approved by:

Original signed by
Linda Lizotte-MacPherson
President

Ottawa, Canada
Date: August 19, 2015

Original signed by
Christine Walker
Chief Financial Officer

Ottawa, Canada
Date: August 14, 2015

6. Table 1: Statement of Authorities (Unaudited)

Fiscal year 2015-2016(in thousands of dollars)

Total available for use for the year ending March 31, 2016*

Used during the quarter ended June 30, 2015

Year-to-date used at quarter end

Vote 1 - Operating Expenditures

1,413,103

316,152

316,152

Vote 5 - Capital Expenditures

195,629

12,401

12,401

Statutory Authority - Contributions to employee benefit plans

182,609

45,652

45,652

Statutory Authority - Refunds of amounts credited to revenues in previous years

0

5

5

Statutory Authority - Spending of proceeds from the disposal of surplus Crown assets

0

95

95

Total budgetary authorities

1,791,341

374,305

374,305

Non-budgetary authorities

0

0

0

Total authorities

1,791,341

374,305

374,305

Note: Numbers may not add and may not agree with details provided elsewhere due to rounding.

* Includes only Authorities available for use and granted by Parliament at quarter end.

Fiscal year 2014-2015(in thousands of dollars)

Total available for use for the year ending March 31, 2015*

Used during the quarter ended June 30, 2014

Year-to-date used at quarter end

Vote 1 - Operating Expenditures

1,397,915

395,261

395,261

Vote 5 - Capital Expenditures

161,906

9,725

9,725

Statutory Authority - Contributions to employee benefit plans

176,570

44,142

44,142

Statutory Authority - Refunds of amounts credited to revenues in previous years

0

41

41

Statutory Authority - Spending of proceeds from the disposal of surplus Crown assets

0

42

42

Total budgetary authorities

1,736,391

449,211

449,211

Non-budgetary authorities

0

0

0

Total authorities

1,736,391

449,211

449,211

Note: Numbers may not add and may not agree with details provided elsewhere due to rounding.

* Includes only Authorities available for use and granted by Parliament at quarter end.